Conducted at a time when increasing numbers of the nation's young children are in child care and when the American public is concerned about children's readiness for school, the Cost, Quality, and Child Outcomes Study provides the first comprehensive econometric and psychometric analysis of child care and children's outcomes. The study was designed to examine the relationships among the costs of child care and the nature and effects of children's child care experiences. Cost and quality data were collected through visits to 50 non-profit and 50 for-profit centers in each of four states: California, Colorado, Connecticut, and North Carolina. Trained data collectors conducted interviews with and distributed questionnaires to center directors, teachers, and parents; they also observed two randomly chosen classrooms in each center. Data were then collected on 826 children from preschool classrooms visited earlier. The study found that while child care varies widely within and between states and sectors of this industry, most child care is mediocre in quality, sufficiently poor to interfere with children's emotional and intellectual development. Market forces constrain the cost of child care and at the same time depress the quality of care provided to children. It costs somewhat more to provide good quality care than to produce poor quality care; however, higher costs are not obviously reflected in parent fees, which are relatively similar in centers of different quality. Based on the findings, the following recommendations were made: (1) launch efforts to educate parents on identifying high quality programs; (2) implement higher state standards; (3) increase investments in child care staff; and (4) assure adequate financing and support of child care. (BGC)